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Expert analysis on the most pressing issues facing the renewable energy sector in the U.S and abroad from ACORE staff, members and supporters.

A Bright Opportunity: Soft Cost Reductions for PV Installations

Published on 15 Jul 2014 | Written by |

Solar energy is the most abundant source of energy available on the planet, and it has been harnessed in the conventional form of photovoltaic (PV) cells for over half a century. The improvements in efficiency and reductions in hardware costs in recent years have resulted cost decreases of over 40% and have led to significant increases in installments worldwide. In fact, 29% of electricity generation capacity added in 2013 came from solar installments. But staying ahead of climate change will take more significant adoption of renewables. Fortunately there are still plenty of opportunities to continue driving costs down and encouraging more widespread deployment.

A recent study by the National Renewable Energy Laboratory shows that over 60% of the total cost of residential and over 50% of commercial PV cell systems lay in “soft” costs. Included in these soft costs are numerous other than the cost of hardware, including labor, supply chain costs, permitting costs, indirect corporate costs, and others. With such a large proportion of the total cost found outside of the hardware itself, there is a huge opportunity for outright cost reduction in many of these soft cost areas.

The Sunshot Initiative, founded in 2011, is one program that has recognized this opportunity. DoE’s SunShot allocates funds for projects with potential to reduce soft costs, such as a software solution replacing site assessments with satellite imagery. There have also been some efforts to foster regulatory support, as well the implementation of ideas such as the Rooftop Solar Challenge, which helped decrease permitting times by 40% and costs 12% for almost 50 million Americans. However, despite the progress of these and additional proposals, including standardization of permitting and inspections, we need to move beyond crowdsourcing for innovative ideas.

True political support and broader funding need to accompany healthy competition in order to improve solar technology and reduce soft costs. For instance, varied policy measures and government funding have helped Germany achieve soft costs that are 50% less than those seen in the United States. This has been possible through significant policy support of smaller scale energy production (to increase efficiency and avoid overconsumption) along with substantial government support. In the United States, however, only 19% of federal funding for energy sources goes towards the renewable energy sector, while oil, natural gas, coal, and nuclear receive 79% of said funding. While there are currently policy measures in the United States supporting renewable energy use, such as investment tax credits and renewable portfolio standards, there have been no clear or long term policy measures put in place to both reduce soft costs and give helpful signals to investors. For example, parts of Canada, Germany, Spain and others have implemented feed in tariffs in support of photovoltaic cells in particular, and have seen and increased photovoltaic use.

While many current measures in the United States support solar energy, there are none that work specifically to target soft costs. We need to promote regulations that work to eliminate soft cost inefficiencies associated with photovoltaic cells. States such as California and Arizona have already shown themselves to be leaders in expansive use of photovoltaics, and it’s time to step up regulatory support to compound their efforts. Clear, long-term federal policy signals would bolster investment, but it will likely fall to individual states to streamline components such as permitting and installation requirements.